Sunday, December 21, 2008

Global stocks fell sharply last week on news of increasing inflation which will limit the Federal Reserves ability to continue cutting interest rates. On Tuesday the Dow Jones Industrials tumbled 294 points following the Fed's announcement of a quarter point cut to the Fed Funds rate. The financial industry is going through a major retrenchment, losing more than 25% in aggregate capitalization since July. The real estate market is collapsing. You get the picture.

Take the case of Citigroup - a once- great bank brought near to ruin by a grossly negligent board of directors. The cost? A mere $351 billion - that is, only $1,000 for every man, woman and child in America. Blame abounds, but most of it must can be directed to the Citigroup directors - the men and women paid well to make corporate policy, and to oversee its proper execution. But that got me thinking about blame...

Let's look at former Chairman of the Federal Reserve of the United States Alan Greenspan.

In his trademark opaque language; Greenspan tiptoes through the well-documented facts of his tenure as Fed chief to absolve himself of any personal responsibility for the ensuing disaster. Greenspan's apologia is a masterpiece of circuitous logic, deliberate evasion and utter denial of reality. He says: I do not doubt that a low U.S. federal-funds rate in response to the dot-com crash, and especially the 1 per cent rate set in mid-2003 to counter potential deflation, lowered interest rates on adjustable-rate mortgages (ARMs) and may have contributed to the rise in U.S. home prices. In my judgment, however, the impact on demand for homes financed with ARMs was not major. "Not major"? 3.5 million potential foreclosures, 11-month inventory backlog, plummeting home prices, an entire industry in terminal distress pulling down the global economy is not major? But Greenspan is partially correct. The troubles in housing cannot be entirely attributed to the Fed's "cheap credit" monetary policies. They were also nursed along by a Doctrine of Deregulation which has permeated US capital markets since the Reagan era. Greenspan's views on how markets should function were -to great extent -- shaped by this non-interventionist/non-supervisory ideology which has created enormous equity bubbles and imbalances. The former-Fed chief's support for adjustable-rate mortgages (ARMs) and subprime lending shows that Greenspan thought of himself as more as a cheerleader for the big market-players than an impartial referee whose job was to monitor reckless or unethical behavior...

Sheesh - shady crooks, ethical lapses that cost people there retirements and homes - its enough to get you all warm and cozy in time to enjoy the holidays. Right?

Yunus founded the Grameen Bank in 1983 in Bangladesh on the theory that giving no-collateral loans to the poor would help them out of poverty by providing loans on terms suitable to them and by teaching them a few sound financial principles so they could help themselves. Because hardly any women in Bangladesh could qualify for a loan 32 years ago, Yunus saw to it that 50% of Grameen's borrowers were women.

Once he realized women were investing more of their loans into improving the lives of their families, the bank started lending to them almost exclusively. Of Grameen's 7.5 million borrowers, 97% are women. The bank lends about $1 billion a year, lending out individual amounts averaging less than $200. At first, the typical loan is for about $30.

Yunus' personal loan of small amounts of money to destitute basketweavers in Bangladesh in the mid-70s, the Grameen Bank has advanced to the forefront of a burgeoning world movement toward eradicating poverty through microlending.

"The majority of people on this planet do not have the opportunity to do banking at conventional banks," Yunus said. "They say all the time that the poor are not creditworthy. And we showed how creditworthy they are."

The bank has provided $4.7 billion dollars to 4.4 million families in rural Bangladesh. With 1,417 branches, Grameen provides services in 51,000 villages, covering three quarters of all the villages in Bangladesh. Yet its system is largely based on mutual trust and the enterprise and accountability of millions of women villagers.

Today, more than 250 institutions in nearly 100 countries operate micro-credit programs based on the Grameen Bank model, while thousands of other micro-credit programs have emulated, adapted or been inspired by the Grameen Bank. According to one expert in innovative government, the program established by Yunus at the Grameen Bank "is the single most important development in the third world in the last 100 years, and I don't think any two people will disagree."

So if you believe in Santa -- or if you just believe we all need to spread kindness around a bit -- consider the Yunis' in the world whilst remembering the Greenspan's.

Then go. Do something good. And make this a Merry Christmas, Happy Hanukah, Festive Kwanzaa and Killer New Year.

Saturday, December 13, 2008

Open a newspaper, turn on the computer and the brutal economic news comes at you like an asteroid storm. Now no doubt some of it is true. But am I the only who feels the fear-mongering coming on a bit too strong?

Instilling fear has so far been working with company after company laying off workers, even when its absolutely not necessary. Hey why not lay people off when we can get the others to work twice as hard? Yet we read and hear more and more of these stories, and shake our heads in disgust...

Sure, he’s at least nominally responsible for the biggest bankruptcy scandal in banking history. He feasted on the subprime market until it folded in on itself and ripped the economy a new bottom line. He set the tone for a Wall Street culture that rewarded ruthlessness and bullish behaviour with a lifestyle of tawdry wealth and taste. He set new standards in ethics-lite investment practice and paid himself over $480 million in his seven years as CEO of Lehman Brothers. And when the company tanked, he washed his hands.

But perhaps, we the people are as much to blame as the Dick Fuld's of the world. After all - we enable and give a mandate for corporate greed to flourish don't we?

In Fuld's case, he was given a mandate to screw the market for every penny he could get. Dylan Young:

For six and half years that’s exactly what he did. And he was loved for it—by the market, the hedge funds, the executives, the pension plans, the shareholders, and the press. But these aren’t the fairest of fairweather friends. The instant Lehman Bros. started to go south, Fuld had to know he was going to wind up taking it in the neck.

In early 2008, he forwarded a proposal that might have kept Lehman Bros. out of the shithole but the investors ﬂinched and the blitzkrieg raged—bankruptcy, bailout, ﬁre sale, you name it. Fuld had killed the very company where he had risen from an intern 42 years earlier to a corporate general’s rank. And CNN, which had lauded him as the top CEO of 2006, put a warrant on his head as one of their 10 Most Wanted: Culprits of the Collapse.

But this is not really about the Dick's of the world is it? Rather isn't it about us? As long as the money keeps rolling in no one cares whether its done by 'unscrupulous opportunists or high-minded philanthropists.'

As we ask ourselves who helped to kill the economy, maybe its time for us to look in the mirror.

Tuesday, December 9, 2008

Hossein Derakhshan, an Iranian-Canadian blogger known as Hoder was arrested in Tehran on charges of spying for Israel and could face the death penalty, according to a number of media reports.

Derakhshan, lived in Toronto for seven years and moved to the U.K. in 2007. Widely considered the most prominent Iranian blogger, Derakhshan has been writing on his blog since 2001 and it has been censored numerous times by Iranian authorities. His pioneering work has earned him the nickname of "Godfather of the Iranian Blogosphere." Hoder is also considered a controversial figure for his support of the Iranian regime.

In 2006, he visited Israel and at the time was quoted as saying that this could make returning to his birth country difficult.

"This might mean that I won’t be able to go back to Iran for a long time, since Iran doesn't recognize Israel, has no diplomatic relations with it, and apparently considers traveling there illegal. Too bad, but I don't care. Fortunately, I'm a citizen of Canada and I have the right to visit any country I want."

The reason for his visit to Iran is unknown.

It has been speculated that Derakhshan was likely arrested sometime in the last two weeks. A number of journalism activist groups have begun campaigns calling for his release.

Thursday, December 4, 2008

For those of you not in the loop, Canadian Prime Minister Stephen Harper suspended the country’s legislature for more than 7 weeks in a bid to stave off a challenge from opposition parties seeking to bring down his government.

Harper, re-elected in October to a minority government, said Governor General Michaelle Jean, who acts as the country’s head of state, agreed to his request to close Parliament until Jan. 26. The government’s first order of business will be a budget scheduled for Jan. 27, Harper said, calling on the opposition to work with his administration on a “stimulus” package for the ailing economy.

The political crisis was sparked Nov. 27 when Finance Minister Jim Flaherty presented a fiscal update that included cuts to funding for political parties, limited civil servants’ right to strike and failed to offer a stimulus package to spur economic growth. The three opposition parties said they would oppose the plan and banded together.

The main opposition Liberals agreed to Dec. 1 was to form a coalition with the New Democratic Party and the Parti Quebecois in a bid to accelerate a stimulus package for the economy and oust the Harper government. The turmoil centers on how to manage Canada’s response to the global economic crisis.

So in a bid to buy time, Harper refused to grant the opposition a vote in Parliament that would have brought down his government, instead asking Jean to let him suspend the legislature. The three opposition blocs combined hold a majority of seats in the House of Commons, Parliament’s lower house.

Harper admitted no errors in judgment today. Nor did he seek absolution during a nationally televised address on Wednesday.

The procedural move is unprecedented, marking the first time a prime minister has requested the suspension of the legislature to avoid a so-called confidence vote. Parliament’s suspension comes less than three weeks after the session began.

“For the first time in the history of Canada, the prime minister of Canada is running away from the Parliament of Canada,” Stephane Dion, the Liberal leader who would head the coalition government, adding he will “respect” the governor general’s decision.

Harper’s Conservatives went into the Oct. 14 election with 127 seats in Parliament and increased their total to 143, still short of the 155 needed to control the legislative agenda. The government needs support of at least one other party to pass legislation.

Harper, prime minister for almost three years, has since backtracked on the political funding and labor rights. He and Jean met for about two hours this morning. Jean didn’t speak to reporters after the meeting. The role of Jean, Queen Elizabeth II’s representative in Canada, is mostly ceremonial.

In the Commons yesterday, Liberal MP Ken Dryden (my MP!) said the Prime Minister broke faith with Parliament in the economic update. "How do we repair the irreparable?" Mr. Dryden asked. "To the Prime Minister to help him with his answer: Sorry, it is over; we cannot trust him any more. We need a new prime minister."

Liberal MP Derrick Lee, meanwhile, compared Harper's move to suspend Parliament to the burning of the Reichstag in Germany by the Nazis. Hyperbole much? But kinda true too.